Jolly Old England has had alot to celebrate this summer. The Olympics follow on the heels of the Queen's Diamond Jubilee. So today, all is rosy in a spruced-up London. BUT when they blow out the Olympic torch and the party is over, the euphoria will likely quickly turn to angst.
Here is why:
Great Britan's GDP is still contracting and Europe is in an economic funk. According to the Wall Street Journal European edition, the U.K.'s GDP fell by .7% last quarter and in England four years after the 2008 recession, output is 4.5% below its pre-recession peak. And, Great Britain is in much better shape than Greece, Italy, Portugal and Spain.
The pace of economic contraction in the euro-zone picked up in July compared with the previous month as consumer and business confidence weakened amid the deepening fiscal and banking crises, according to a measure of activity compiled by the Centre for Economic Policy Research and the Bank of Italy.
A monthly survey also released Friday showed consumer confidence in France, the euro zone's second-largest economy, weakened in July, and the unemployment rate in Spain continued to rise in the second quarter, hitting a record high of 24.63%. In Italy, the euro zone's third largest economy, another monthly survey released Friday showed business confidence weakened as new orders dried up.
Why should we care? What happens in Europe just doesn't stay in Europe. For example, Ford Motor Co., the automaker which did not ask or receive government financial assistance, suffered 57% drop in earning during the second quarter despite good domestic sales. The European economic slow down is impacting U.S. companies and Ford's European losses are expected to exceed $1 billion for the year.
So in today's world, we are more connected and interdependent than ever before. Meanwhile, the U.S. Economy continues to struggle with anemic job growth.
EDITOR'S NOTE: AWB President Don Brunell is in Gdansk, Poland, for a week helping with Gdansk Business Week. He will be blogging from the other side of the pond, as they say in England.